Last night I went to a Massachusetts Technology Leadership Council (MTLC) event featuring Alan Greenspan as the speaker. The format was 60min Q&A lead by Paul Denninger, Chairman of Jeffries Broadview. Paul did a great job of keeping Greenspan away from economic jargon to my slight disappointment–I am a reformed economist, after all.
It was fairly clear that Greenspan relished the opportunity to speak his mind without regard for politics or the administration. My favorites:
- “CEOs should certify their financial statements.” The rest of Sarbanes-Oxley should be scrapped. The problem is that “nobody changes a bill when the people whose names are on its title are about to retire”.
- If his niece or nephew were just leaving college he’d advise them “to own a hedge fund”. If they cannot do this, they “should pass the cup around and start a private equity firm”. Too bad I’m not smart enough to be in a hedge fund. 😉
- “Corn ethanol is a political product” with no real ability to impact current consumption patterns. All the corn would make 6-8M barrels of gasoline equivalent, which is no big deal, and “then the pigs would starve”. Cellulose ethanol, on the other hand, is quite promising, especially if you assume agricultural productivity would continue of its current trend for the next decade.
- In a world of ideas, there are lots of problems with IP. “Should Isaac Newton have been allowed a copyright on calculus?” Pity that he didn’t mention that the USPTO needs lots more & better trained people.
- “Software has high fixed costs and very low variable costs”, which suggests that “a natural monopoly may be the most efficient way to produce”. Good news for big players. Imagine Microsoft goes away. The switching cost to businesses would be huge–with a real impact on the world economy, probably. It is important to note that in the age of broadband not all software follows the high fixed, low variable cost pattern. YouTube and Photobucket are probably good examples. Not complex to build, despite all the scalability requirements. Huge operating costs, be those streaming or adding more storage.
For even more color on the exchange, read Greenspan unleashed at the Boston Herald.
Greenspan is an unabashed supporter of globalization and a firm believer in the law of comparative advantage. He did invoke both Adam Smith and David Ricardo. What he didn’t talk much about–to my disappointment–were the short-term negative externalities associated with re-allocation of resources and how to deal with them from both a political and an economic standpoint. To put it in blunter terms: what to do with all those unemployed factory workers in the middle of the US. It’s kinda hard to turn them into knowledge workers at this point… Or, if you extend some outsourcing trends in high-tech, what to do with all those average software developers in the US whose real incomes will inevitably decline due to world-wide wage pressures. I would love to have dinner with Greenspan and Stiglitz (a Nobel Prize winner in Economics), whose recent book Making Globalization Work is worth reading.